This column could be titled Mammoth Foreclosures 3.1, but the phrase “make’em a stupid offer” really stands out in my mind and is far more applicable to the present. While this statement may have no significance to the vast majority of you, it is ingrained as part of my teenage years. I heard the phrase regularly and it was usually while I was eating dinner. This dates back to long before the mania of cell phones. Our family phone was on the wall in the kitchen, and my father was a real estate broker. Today, I recognize the era––the 70’s––were pretty crappy economic times. (Will we see the return of stagflation?) But at the time nobody really seemed to have more or less than anybody else and nobody I knew had dirt bikes or went snow skiing. On Saturday night my parents went out for dinner, and the kids got Taco Bell, and that was a treat.
At the time I really didn’t grasp what “make’em a stupid offer” meant, but what I’ve come to realize is that my father was trying to get people to make offers during difficult times. And “stupid” meant low or with some creative terms, and any offer got the ball rolling. (Speaking of creative terms, I’ve come to realize that half the agents in my office don’t know what a wrap-around mortgage is––it’s like asking them who wrote “Smoke On The Water.”) Sometimes a stupid offer is the best way to test the waters. I’m sure during those times, much like now, sellers were trying to eke out every dollar and were unrealistic about what the market would bear. And buyers had their own concerns. But like current times, at least a stupid offer is an offer and it might just find out what the seller’s real motivation and bottom line is. So now with asking prices coming down (and greatly influenced by REO offerings) we’re seeing potential buyers testing the waters. And some of the most serious testing is going on with the bank owned properties.
Not a day goes by that a call comes in with somebody wanting to make a stupid offer. A few days ago someone wanted to offer $125,000 on a REO condo listed at $299,000. “That’s as high as they will go” the agent said. Now California real estate laws certainly allow people to make stupid offers, and the same laws don’t compel the seller to respond to any offer. I think that’s why it is called “an offer.” But the bank owned properties in Mammoth are bringing out the stupid offers, some really stupid, so it is time for a little discussion on the topic.
Quite frankly, and many real estate “gurus” highly recommend it, every buyer should start off with a stupid offer, especially in these types of economic times. But there is always trepidation in doing so and rightfully so. Experience has shown that potential buyers who make ridiculously low offers are seldom for real. Even when you successfully get them into an agreement/escrow they often use a contingency to get out of it, or even worse, they arbitrarily wiggle their way out of it and waste everybody’s time (and usually piss everybody off and dangerously raise everybody’s blood pressure). And in the small brokerage community of Mammoth, the names of these “buyers” usually get around pretty quick (oh, those guys!). And in our market some of these offers come from people who have never even seen the property they are offering on. Some have never even been to Mammoth. Ironically, many of these similar types of buyers are folks who bought on the heels of the “Starwood announcement” and are now the same one’s being foreclosed on. Maybe they would be better off at the tables in Vegas.
There is an art to making stupid offers and many of the “successful” agents from the recent goldilocks period don’t want potential buyers to understand it. It’s called work. And some critical thinking might be required too. (“What? You mean I have to read the whole MLS input AND some associated documents? You must be kidding?”) Just a little investigation about the property and the seller can tell you plenty. In fact, I’m convinced that some of the big players who rode through Mammoth in the past decade actually hired real private investigators to find out all kinds of things about sellers. Knowing when the seller bought the property, how much is owed on it, or have there been any offers, etc., are the basics. This is cursory knowledge before even considering the making of a stupid offer. Or even just asking the listing agent why the seller is selling (assuming you can get the truth) is a good question. Sometimes just a keen walk-through of the property will reveal things, or talking to the neighbors. There are all kinds of tactics.
And buyers who want to make stupid offers with a chance of scoring good deals need to prepare also. Getting pre-approved for loans or having those account statements handy is essential (and required to make an offer on an REO). Doing some front-end due diligence and making offers without significant contingencies proves serious intent. Stupid offers with tons of contingencies and lackadaisical intent aren’t worth much. And “cute” provisions that come out of left field are even worse. Sellers in a position to even consider a stupid offer want to deal with someone who is likely to perform on the terms. They don’t want to deal with people who are just throwing poop at the wall. The asset managers of REOs don’t even want deal with these types of buyers––every T must be crossed and I dotted. I use the analogy; buying an REO is not a horse race, it is more like applying for a job.
This brings me to the subject of short sales. There are lots of agents chasing short sales around and plenty of seminars that agents can attend to convince them to do so. If you’re a buyer chasing a short sale, especially in Mammoth, you better do some due diligence on the seller. Does your agent understand the difference in California between a recourse and non-recourse loan? I’ve been quiet on this subject––just watching the process in this new economic environment––trying to see if it is even feasible. Making stupid offers on short sale listings in Mammoth is futile. The market is showing that getting involved in a short sale in Mammoth is not only going to be frustrating, but also likely a waste of time. Again, it’s the nature of this market; the structure of the loans used to purchase the preponderance of properties in Mammoth (non-primary residence), and the financial position of the “sellers” (no provable hardship), and the lender’s accounting, tax, and insurance strategies all in the mix. I don’t think any government bailout or bill is about to change any of that. Becoming mired in a short sale is one certain way for a buyer to be distracted from finding a real deal on a quality property. But be my guest.
And where might some stupid offers be appropriate in today’s Mammoth market? Try any property with “luxury” in the marketing material and property description. Luxury is the new synonym for overpriced, maybe even grossly overpriced. Luxury is defined in the dictionary as something that is rare or hard to achieve. And yet it has recently come to describe almost every new property in Mammoth. (Or maybe everyone is confused because Mammoth IS the real luxury even though we tend to forget it.) Many developers are still holding on to lots of luxury inventory. Something will have to give. Servicing debt like this is becoming quite unsavory although some forbearance is likely, but that can only last so long. Credit only continues to tighten. And there’s a solid inventory of (luxury) high-end homes (many built on speculation) that are likely to become ripe for stupid offers. And I know there are many lurking, watching, wannabe-scoring-the-trophy-home buyers out there.
The good news for now is that there is still buyer demand. There are even a surprising number of cash buyers. Mammoth still has great appeal to plenty of people. Meanwhile, the fall colors are turning nicely and we’ve had a glorious, crowd-free September with fabulous weather. Mark it on your calendar to spend a future September in Mammoth. And there’s nothing stupid about that.
13 thoughts on ““Make’em a Stupid Offer””
Seems to me the true “stupid offers” were the full price bidding wars that all the real estate agents were more than happy to participate in over the past few years. BTW….Mom’s Friday night restaurant of choice was the Steer n’ Stein on Tustin Ave in Orange…circa 1974. Speaking of Stein…my arm is still sore from hoisting those liters at the Oktoberfest. It was fun but too bad they but such a short leash on it (2:00 to 6:00 on a Saturday….kind of lame). Wilbur
hey Paul, I know who wrote ” smoke on the water “
….best version was on the “Live in Japan” album. DUN-DUN-DUN Dun-Dun-Dah-DUN…FIRE IN THE SKY!!!
Hey, that reminds me…its time to bring back ZigZag Man for President!!
Why I love Mammoth —
Reason #456 — On Sept 27 the Village hosted Oktoberfest offering huge steins of various beers including local brews. Also on Sept 27 the local police in coordination with the CHP mounted a DUI checkpoint on Old Mammoth Road with manpower and coordination of Operation Desert Storm. So come to Mammoth, celebrate Oktoberfest and then get popped for a DUI. Ole!
Reason #457 — Village has been modified to replicate set from Will Smith movie I Am Legend.
Reason #458 — 80/50 still marketing itself as a viable alternative (hey why buy land when you can buy a fraction of, um, something — and a view of the Village)
Reason #459 — guaranteed success of local coffee houses as Starbucks closes in Village and at Meridian and Old Mammoth.
Reason #460 — CVS on Saturday with one, count ’em, employee on duty and ten customers, not one speaking english, each holding a minimum of one 12 pack while the rest of us waited with such non-essentials as tooth paste, medicine, etc.
Reason #461 — The trees in the Sierras change color in October, the fish still jump at Convict Lake, Rock Creek trail is awe-inspiring and my kids love this mountian whether prices go up or down.
You can’t lowball nature.
p.s. My Woman from Tokyo still kicks ass
gotta love Space Truckin
That sobriety checkpoint in town was crazy. I worked Saturday and then went for a late afternoon bike ride. I had read about the checkpoint so I went out to see what it was about (a good reason to stop by a and pick up a new Mammoth Brewing 22oz. bottle of Doppelbock). I was driving past my office on Old Mammoth Road and then it was like entering the set of Close Encounters with more cops than a doughnut convention. I’m glad I was going the other way. Sober or not, pulling into that would have given me heart palpitations, or worse.
our tax dollars at work
Here’s your screaming deal….
Better hope this is a good snow year. Mammoth properties will drop another 30% from here. It may happen sooner than later. Primary residences in So. Cal, haven’t seen the plunge yet. Orange county is going to get hammered in the next 6 months. These people can’t afford their homes. You fools have already maxed your equity lines. If you paid 1 million, and put 20% down, which very few did (most put less down), you are upside down as the value is now about 750K,maybe probably more like 600,00! You wont see that home valued at 1 million till at least 2020. Sad. ALL YOU SUCKERS OVERPAID. What goes up…must come down. Your days of TRADING UP are over. Hope you like paying that 7500 month on some piece of crap in OC!
Got all the toys, escalade, loads of debt and 30k in your 401k.
Ha, the screaming deals will start coming when you realize, the process of appreciation isnt coming back for a long time.
Mammoth will be a fire-sale in due time. Then, I will be laughing an retiring in a sweet 3/2 cabin in Mammoth for about 250k.
Happy Skiing POSERS!
like this guy or not…He is right. He is the one that deserves to survive over the next ten years. Not the greedy sheep that over bought on real estate. They deserve to get slaughtered. They don’t deserve to recover and 90% will not. the 10% that do, will only be due to extreme luck..or something like their step father bailing them out
You guys are only stating the obvious. Of course real estate prices are falling off a cliff. No news here. What I’m wondering is why sellers are being so stubborn. Gone are the days of easy and exotic financing. Gone are the days of real estate doubling in value every 18 months. Gone are the days of speculation. Party’s over dude. It’s a buyers market now. From a buyers perspective, why the heck would I throw a giant 20% down payment on a piece of real estate to not only see it evaporate, but to be up-side down when real estate finally bottoms, when I can save over the next two years and probably pay for it with cash? Even with the volatility of the stock market, real estate is only guaranteed to go down. What incentives are there for buyers today? If, however, you think today’s a wonderful time to buy, headed over to patrick.net and see why it isn’t.
Anonymous @ 7:35AM and Mountain Guy got it right.
I am surprised that Paul is calling these offers “stupid offers”. You know that these offers are at prices that were before the bubble. If wages have not increased, the prices WILL go back…..or worse. People were paying for homes with funky mortgages and home equity loans….those are ALL GONE. All RE agents in Mammoth need to get realistic as to where the prices are heading. And we have not even see the worst. Just wait till July 2009.
Unfortunately, thinking of July 2009 scares me.
Why? I think things are gonna get pretty ugly in California going forward.
Other things that worry me, unemployment. Wait for the realy numbers to come out! Ouch! I mean, just for example… 10% of Goldman Sachs layed off. Yikes. Just imagine the monthly debt and leverage those boys have over their heads. UUUGLLLYYY!
Many other companies will follow laying off.
Many companies are gonna start moving out of California.
OMG, right now in California there are sooo many home listed. Why in hell would anyone list their home in this market unless of course they are in financial trouble. So, what does that tell you? A wholelotta people are in serious trouble.
All I can say..Pray for a gnarly winter, with many cold humongous dumps, cause it may be the only way to escape from the hell to come!
Thank goodness I have a pass!
Happy Skiing Posers!
YOur bolg is very nice. I have really learnt a lot from this blog thanks